John TravoltaCruise Ship Assault SuitMysteriously Dropped

2/6/2013 6:00 AM PST

John Travolta -- Cruise Ship Assault Lawsuit Mysteriously Dropped

Breaking News

John Travolta is officially off the hook in an alleged high seas assault -- the cruise ship employee who sued him agreed to drop the matter ... just 2 days after a judge ruled the case would be argued in open court.

As TMZ first reported, Fabian Zanzi sued Travolta last June ... accusing the actor of exposing his penis in his stateroom, and hugging Zanzi during a 2009 Royal Caribbean cruise.

But on Friday a federal judge shut down Travolta's attempt to handle the case in arbitration, instead of going to trial. The judge's decision essentially left Travolta's attorneys with 2 options -- go through a messy public trial ... or reach a settlement with Zanzi.

The case was dismissed on Monday, but terms were not disclosed -- so it's unclear if Travolta made a financial settlement with Zanzi.